The Inquisitive VC: Lovina McMurchy — Movac
Lovina McMurchy is a Partner at Movac, one of New Zealand's oldest and largest venture firms. Previously Lovina spent 20 years in the US as a tech executive for Starbucks, Microsoft and Amazon.
We talk about her journey from South Auckland to the US, some of Lovina's learnings as the General Manager of Skype, and what she will be doing with Movac.
NA: Thanks for joining me Lovina. I’d love to start with an overview of your background, your journey from New Zealand to all the great companies you worked for and now that you’re back home, what you’re doing?
LM: I grew up in South Auckland and went to the University of Auckland, did a couple of degrees. I was really a statistician, a data scientist and I worked at Colmar Brunton. I did some amazing things very early in my career, I think that New Zealand gives you that chance to be involved, when you’re just starting out in some big projects. So things like all the research around the launch of the Zespri kiwifruit, that was amazing and the opening of the Te Papa Museum. Then I realized at some point that I was spending more of my time on the business issues, than on the research methodology issues and that I didn’t necessarily have a deep background in business because I was a technician.
I then went to Vodafone and led pricing for them, and had the same experience. Data is the tool of the trade, but really it’s the business situation, how do you open new markets? How do you price, seed and cannibalize? I decided I wanted to go and study for an MBA. I got very fortunate, got a scholarship to Harvard Business School. So headed off to do that, thinking I’d come right home immediately afterwards. Once you’ve done an MBA in America, they actually give you a work permit for two years. So I thought, well, why wouldn’t I do that?
I went out to Seattle, really because I was homesick, kind of a funny thing. Seattle is the most Auckland-like place in America. So I went to Seattle and worked for Starbucks, doing technology stuff for Starbucks, some very cool incubation work, launching the wifi network. That was the first national wifi network anywhere in America and then also launching their first order by phone service, which is now 20% of their revenues.
From there, I went to Microsoft, and spent 10 years really doing a variety of general management positions. I was building out a general management skill set. I wanted to do everything. I’ve worked in sales, I carried a bag and I had a quota, I was in operations, I did big marketing, meaning like TV, marketing for Windows, I did online marketing and then I ended up getting into product with the Skype acquisition.
Once I got to the taste of product, I really fell in love with it. I went to Amazon, and spent four years there, again, in a variety of business leadership positions, working on building out their subscription capabilities and helping to grow the subscription revenues for Amazon. Then finished up the tour of duty in Alexa Shopping, which was a very strategic and fast-moving area for Amazon.
That was 20 years and my head popped up and I said, “Oh my God, it’s been 20 years, I’m still in America. How did that happen?”. The stock had gone up 500% in Amazon and it vests out after four years. That is a moment where you think you can take a bit of a breather here. We came back to New Zealand as a family, really just for a six months sabbatical. At about month four, my husband and I just looked at each other and said “do we really want to come back?”. So, we went back to the US packed up the house, put everything in a container and then moved back here in September 2019, to really kind of give it a go. We get told by friends, our timing was pretty impeccable.
NA: It does sound like your timing was on point. The companies you worked for are household names. You led the transition of Skype from a subscription model to an advertising model, and I want to talk to you about the biggest difficulties you faced specifically in that transition? I feel like those are two business models that founders or businesses are always considering the best for their business.
LM: That’s a story inside a story, because if you think about it I’m working for Microsoft, and at that time its biggest acquisition ever, they bought Skype for US$8 billion.
The reason they bought it was defensive because they were trying to protect the Link business and they saw Skype coming up into small businesses, but you know how acquisitions go, someone in Corporate Dev had a business plan on how we’d make this thing pay for itself.
The revenue model was very challenged because it had been about selling credits and you buy credit in Skype when you’re calling a landline or a mobile phone. It’s the opposite of a network effect in a way. The more people have Skype, you don’t pay anything for Skype to Skype calls. It’s a revenue model that actually destroys itself as it grows.
When we bought Skype, we knew that the revenue was in decline on the existing monetization, which was to sell credits. Again, the main reason Microsoft bought it was a defensive play relative to what they were trying to do in the business market. Some Corp Dev person said, “Hey, we think there are opportunities on the consumer side, and this helps justify our $8 billion acquisition, so someone in Microsoft, gets to go and work on that,” and that was my job.
As a corporate employee, I look at that and I can tell you a story of success in a way because we grew that advertising business from nothing to about $150 million a year. It was really hard, what were the hard things about that? Working with advertisers wasn’t hard. Skype was a hot product and advertisers were desperate to buy advertising inside a product that was very video forward and tended to have a quite premium global audience. That was not hard. The hard thing was all of the guys that had built this product, cared a lot about the user experience and just did not want advertising in the product.
At the time advertising as a business model was very much growing, but it was growing in a way that wasn’t thinking of the customer. People would build free products and shove ads all over the place, in a way that wasn’t always the best thing for the consumer environment.
Our reference point, we had products like Windows Live Messenger, where people would text in it, but it also had video and it was full of ads. So we put ads into Skype and grew that business, all the heavy lifting was about getting internal buy-in to do that.
After about a year, Whatsapp started to grow like crazy and started to take away Windows Live Messenger’s audience, and that was driven off the mobile-first world, and it didn’t have ads in it. It was really confusing to us because Facebook had bought them. Facebook, which is an advertising model and yet they hadn’t put ads in it. I think they’d said they weren’t going to put ads in it and we almost doubted them.
That was our competition and having done that, built out the ad business, the last thing I did in that business was to end my own job because I then went into the executives and said, “I know you guys had listened to business plan about making this money, but it’s not the right thing because the people we are competing with are not doing it and the customers don’t like it”. Especially on a mobile screen when you don’t have a lot of real estate in the first place. The last thing I did in the business is to convince the executives to at least take advertising out of the mobile version of the product.
I think that was a real lesson because, as a founder or as a corporate employee, you’re desperate to get your revenue line growing and do that in the short run, but you have to step back and look in the long run and say, “Hey, what do the consumer’s need? Who are we competing with? And what other alternatives, other than the obvious ones, are there to really make this thing work.” It’s less than an insider lesson, I really feel like I learned a lot from that and part of it as a success, because I kinda hit my corporate goal.
But part of it was a failure because maybe we were doing it for the wrong reasons and then when you look then at the growth of say like a Zoom, why wasn’t Skype that? I think we were somewhat misguided about what was important to us, and optimizing for this business plan that it’s some Corp Dev person had put together as opposed to really being led by the customer. Really interesting lesson.
NA: Yeah, that is very interesting. I always hear how difficult it is for big corporates and enterprises like that to innovate and think as a startup would.
LM: I think, especially again, that Corp Dev thing, someone does a acquisition and there’s a plan and then it’s a way of dropping accountability. They bought it on these assumptions, and so think they have to stick to the plan and you compare that to a startup, that is not how startups work.
Their job is to go and find product-market fit, but you can put any plan you’d like together, but if you are looking at the market and not seeing the result you want, you have permission and then an obligation to pivot to a new plan, but corporates don’t always work like that.
NA: Now you’re a partner at Movac. What actually led you to join Movac and becoming a venture capitalist?
LM: Yeah, back at business school everyone wanted to be a VC, it was a hot thing. I never had any interest in it. It’s quite funny to think 20 years later, I’m actually now working in VC. To step back it was about what I was trying to do when I came back to New Zealand from a career point of view, I said, “Hey, the next 20 years of my life, I want to do something different to the last 20 years of my life.”
I hit that point where I wanted to make a pivot and I think I learned so much in America in those different environments I was in, but I think at the end of the day, you do have a little bit of a feeling like you’re fuel in a machine if you’re not there, it doesn’t really matter because there’s someone standing right behind you that will take that job and probably do just as well as you. There are really great people that a company like Amazon can hire.
A sense of what I was doing in America wasn’t adding unique value to the world. I wasn’t taking my specific life story and doing something kind of unique and differentiated with that. I think also living in America most of the time loved it, but the last four or five years, really starting to get a sense that the American system’s gonna start to unwind.
There were things about it that are quite deeply broken and then I think when we came home, there was a sense of just being refreshed by how differently things worked here and having a sense that, maybe New Zealand had the opportunity to be up to speed, to solve some of these bigger problems in the world. So I thought how can I take everything I’ve learned during that incredible time in America and bring it home and then reinvest it back into New Zealand and New Zealand Inc.
Then when I thought about how would I do that? There was no one company that leapt out at me where I said, ah, it’s that, that company will be the thing that I can uniquely contribute to. Maybe that’ll come at some point in the future, but I didn’t see it. Then I had lots of invitations to join boards and things like that. I thought, maybe that’s how I can have the most leverage to get into a role where there’s a portfolio of companies that I get to work with.
You need to be involved in enough things that you find those couple of things that really take off.
That led me to VC, and there was very much a trend in VC, historically it’s been very, financial people go into VC, but more and more founders actually want to have people in an operating environment who can walk a bit more in their shoes, be the people that give them the money and then become involved.
I literally talked to everybody in VC in New Zealand, didn’t take that long (laughs). Movac has been doing it for 20 years, very professional, have the institutional money. I thought, “Hey, I’ve got stuff I can bring, but there is stuff I have to learn and so who do I want to learn from? Who can teach me how to do this?”
I just really felt that it was Movac, someone like Phil McCaw is a legend and so the opportunity to come and work for Phil and his team and learn from them. I think there’s a value alignment there, Phil had this incredible background, with TradeMe, where more or less the first thing he touched turned to gold. I think Movac is very driven to maintain our record of having, top 20% of returns, which we have across three out of four funds, but there’s also this, probably starting with Phil’s leadership, more of a sense of we’re doing this for a bigger reason.
That theme of we want to build something in New Zealand, that is sustainable and has an impact, that’s kind of bigger than ourselves. That idea is very much part of what Movac is about. That really resonated with me, coming back from the US wanting to have an impact here.
NA: Yep, that’s a very interesting way to put it. You guys announced a couple of investments recently. You personally, as one of the partners, what do you look for, when you’re considering an investment, what would you say are the top three things that are the most important for you?
LM: We define three specific stages and this fund is a multi-stage fund, we’ve got pre-A, A and then B and C, and we’ve got very clear criteria that we look for against all of those stages.
The thing that really makes me pay attention is this notion of unfair advantage. There are so many different businesses you could create, but what is it about this business and this founder or founding team that makes you think you can win? What’s the special thing in your life, that’s happened to you or your environment or your upbringing that makes this be right for you to be the person that’s going to go on and make this a success?
I think about some examples, Movac’s success stories, Aroa Biosurgery is a really, very cool one. Where New Zealand has all these, ruminants, sheep, cows, and Aroa had the global patent rights to make wound care out of sheep and cows stomachs. It makes total sense. We have so many of them, wouldn’t it be awesome if you can take something which has actually considered waste, that we dispose of and turn it into something that promotes healing.
Now Brian Ward, also his background in science and he was in a position where he can see the trend moving towards biologicals. Part of it was a New Zealand story and part of it was a Brian Ward story.
I feel a similar way right now around aerospace, actually and around cleantech, but with aerospace, why is all this aerospace stuff happening in New Zealand? I was talking with a couple of my EHF fellows who are experts in space, that are down here. They said they have this map of the world with New Zealand in the middle of it. Then you look at it and it’s completely surrounded by ocean and from an aerospace point of view, when you see that, what you think is, the sky is not crowded.
New Zealand has this competitive advantage for rocket launching because of our remote location and in addition to that, we’ve got government policy where the aviation rules are very liberal that allow for things like Rocketlab.
You’ve got our location as an advantage, the policy and regulatory environments as an advantage. Then you get a founder, someone like Peter Beck, that just started it all and then what you see time and time again, as you get one founder that goes off and does something in the industry. That creates a cluster because everyone they hire then becomes an opportunity for when they leave and start something else that’s also in aerospace. You fast forward 15 years from Rocketlab and New Zealand’s got an incredible opportunity in aerospace.
It’s that story of what’s the unfair advantage, because what we know, and I don’t mean this in a negative way, but New Zealanders are hardly ever going to outwork like Americans or Chinese people. We’re not going to get there because we’re running faster or harder than anyone else. We work plenty hard, but not at that level, we just don’t have that in our culture. There has to be some other secret sauce that allows us to win even if we’re running a little bit slower than the person who’s running faster.
NA: What’s a secret obsession of yours that most people don’t know about?
LM: I really love Jane Austin novels. I’m a reader and I like to read novels, but I just love Jane Austin. My favourite Jane Austin would be Pride and Prejudice. Obviously, I’ve read Pride and Prejudice, many times, but I’ve also read all of those, really cheesy novels that are like other authors trying to continue on the story. Most of which are these silly romances of when the Darcy’s are actually married and they have kids and there’s some that have murder mysteries.
NA: That’s a great point to talk to you about then. What is the latest investment that you have made and why did you make it?
LM: I led the investment in Solve.io, great company. They’re working on an open-source technology that allows companies to create their own cloud environment, real-time, basically datamart, and it’s targeted at e-commerce companies that really need to know who their customers are and every single interaction that customers had, whether it’s been things like what ads they’ve looked at? What calls into customer support? Purchases they’ve made?
One of the things that were so appealing about Solve was their counter-cultural vision. Any modern technology company has grown by using a vast array of Saas vendors to help them build their business. Saas has the benefit of allowing fast speed to market because of how easily the solutions are to deploy. But easy to deploy can also mean easy to abandon and VCs don’t like that. “But what’s your moat?” we say. Too often the answer is ” the customer’s data”, meaning that the end customer may not fully own their data and if they choose to leave may have difficulty taking their raw data with them. There is usually the ability to get regular dumps of summary data but not be able to go down into the logs and see what’s really happening.
They’re an awesome team. Neil Capell and Guy Horrocks they’re second time founders, they built a company together in the MarTech space, in the US previously and that got acquired.
They also know that market well, all the customers they worked with when they were in MarTech, had these issues around data infrastructure. They understand their customer really deeply from their past business and what problem they’re trying to solve.
They’re really interesting as they’re a fully distributed company. Neil’s in New York, Guy at the moment is in New Zealand, but sometimes he’s in New York. the engineering team sitting in Wellington and then the head of product, Nick is sitting in Portland, Oregon. It just goes to show, I think we’ll see more of this with New Zealand companies, COVID has in a way made the world kind of flatter.
You don’t all have to be in the same place. They’re a really cool company, Neil and Nick are also Edmund Hillary fellows. I think an example of that program, bringing this incredible talent into our New Zealand universe. I think those guys are coming into cohort eight, so that’ll be really wonderful to be able to work with them across the next few years to grow that business. They’ve got some big plans, so that’s exciting stuff.
NA: Yeah that sounds like a great team working on an interesting idea. Thanks so much for joining me Lovina. I had a great time chatting!
LM: Likewise Nawaz, thanks for having me!
